Correlation Between WW Grainger and WATSCO INC
Can any of the company-specific risk be diversified away by investing in both WW Grainger and WATSCO INC at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining WW Grainger and WATSCO INC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WW Grainger and WATSCO INC B, you can compare the effects of market volatilities on WW Grainger and WATSCO INC and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in WW Grainger with a short position of WATSCO INC. Check out your portfolio center. Please also check ongoing floating volatility patterns of WW Grainger and WATSCO INC.
Diversification Opportunities for WW Grainger and WATSCO INC
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between GWW and WATSCO is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding WW Grainger and WATSCO INC B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WATSCO INC B and WW Grainger is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on WW Grainger are associated (or correlated) with WATSCO INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WATSCO INC B has no effect on the direction of WW Grainger i.e., WW Grainger and WATSCO INC go up and down completely randomly.
Pair Corralation between WW Grainger and WATSCO INC
Assuming the 90 days horizon WW Grainger is expected to generate 0.91 times more return on investment than WATSCO INC. However, WW Grainger is 1.1 times less risky than WATSCO INC. It trades about 0.13 of its potential returns per unit of risk. WATSCO INC B is currently generating about 0.02 per unit of risk. If you would invest 85,662 in WW Grainger on September 3, 2024 and sell it today you would earn a total of 28,588 from holding WW Grainger or generate 33.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.34% |
| Values | Daily Returns |
WW Grainger vs. WATSCO INC B
Performance |
| Timeline |
| WW Grainger |
| WATSCO INC B |
WW Grainger and WATSCO INC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WW Grainger and WATSCO INC
The main advantage of trading using opposite WW Grainger and WATSCO INC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WW Grainger position performs unexpectedly, WATSCO INC can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in WATSCO INC will offset losses from the drop in WATSCO INC's long position.| WW Grainger vs. WATSCO INC B | WW Grainger vs. Indutrade AB | WW Grainger vs. Superior Plus Corp | WW Grainger vs. NMI Holdings |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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